Our bank is considering assessing a fee against dormant accounts.

Can someone tell me where they are getting the definition of Dormant that would be used in such disclosures? I've looked at the state's escheatment law but they define "abandoned" not "dormant". Any help would be appreciated.

Dormant is a term that is defined by the bank. Personally, I like "inactivity fee" so that people don't confuse the two.

This is some good information from Charles Cheatham on recent changes to the Oklahoma Banking Statutes in 2008. I though this might help.

5. Dormant Accounts

Existing Rule 85:11-16, in former subsection (3), now renumbered as subsection (c), permits banks to discontinue paying interest on a “dormant account”; but a bank may pay interest even on dormant accounts, if it wishes--depending on the policy of the bank's board.

This regulation has been amended to add the following sentence: “A bank may determine by policy when an account is considered 'dormant' and such policy may determine an account is dormant even though it may not be considered abandoned or unclaimed under applicable law.”

The Oklahoma Statutes do not define “dormant account.” The new sentence added to this regulation clarifies that a bank is free to establish its own test for when an account is “dormant.”

The basic meaning of “dormant” is “sleeping” (in other words—inactive, unused, or quiet). In the banking context it refers to an account on which there are no transactions for such a length of time that the bank now feels the customer has stopped using the account. Of course, the period of time after which the bank would consider an account “dormant” may vary from bank to bank, and according to the type of account.

Different account types are naturally expected to have different levels of activity. If a checking account has had no activity for six months, the customer has probably stopped using it. By contrast, it might be fairly normal for the average savings account to have no deposits or withdrawals for six months. And a one-year C.D. would certainly not have activity in a six-month period.

I wrote an article on dormant accounts in June 2003. A bank is not required to declare accounts “dormant” at all. Or it can choose to declare certain categories of accounts “dormant” while other categories may never be considered “dormant.” (For example, on a savings account with a high balance, the bank is earning money (not losing money) by continuing to hold the account. It is to the bank's advantage to retain the account indefinitely, and there is no reason why the bank would want to declare it dormant and start imposing dormant account fees, etc.)

But when an account has a small balance and no activity, it may be greatly to the bank's advantage to declare the account “dormant” and to start imposing dormant account fees. For example, on a “totally free checking” account with a $6.81 balance and no activity for six months, there are no monthly service charges, so the account could remain active forever unless something happens. The account is unprofitable to maintain, so declaring the account “dormant” and imposing monthly “dormant account” fees is the logical solution, eventually wiping out the account's balance.

Each bank must decide for itself which types of accounts it wants to eliminate, or stop paying interest on, based on inactivity for a certain time period—and also, in some cases, depending on whether the customer has failed to maintain a minimum adequate balance for that type of account, as defined by the bank.